1. What to Look for in an Employment Agreement
Evaluating Essential Issues
University of Pittsburgh School of Medicine
November 17, 2017
Jessica A. Ellel, Esq.

2. Agenda Negotiating an Agreement How to Use an Attorney
Key Contract Provisions:
Term / Termination
Salary, Incentive Compensation and Fringe Benefits
Restrictive Covenant
Office Location / Call Coverage
Equity Opportunities
Professional Liability Insurance / Tail Coverage
Recruitment Agreements

3. Negotiating an Agreement
STEP THREE
Interview and get as much information as possible.
Talk to the other members of the practice, if available.
Maintain as much flexibility as possible in initial stage of search.
Do not limit interview
opportunities.
Identify “drop dead issues” while in the interview stage
STEP TWO
STEP ONE
Example
If there is an incentive compensation arrangement, talk to the group to see if there is an actual probability/ possibility of reaching the target.

4. How to Use an Attorney
Do not wait until you have already made a decision about a job to engage an attorney.
Determine the role the attorney is to take (i.e., is it to give information or is it to negotiate with the other parties?).
Identify up front the extent of review and how charges will be calculated.
Engage an attorney who has an understanding of medical practices and issues before entering into an agreement.

5. Key Contract Provisions – Term and Termination
Is term self-renewing or does employment end at a specific date?
If term is self-renewing, is there a consideration for salary adjustment?
Can contract be terminated by either party without cause? What effect may this have on relocation? Ramifications regarding restrictive covenant?

6. Key Contract Provisions – Salary, Incentive Compensation and Fringe Benefits
Employee usually will receive a minimum base salary.
Is the base salary at risk for not meeting productivity requirements? Use past practice and MGMA statistics to assess productivity goals.
Is there an opportunity to receive additional incentive compensation?
Is it reasonable to reach these goals?
Understand Net Revenue Threshold, RVU calculations, credit for non-patient encounters.

7. Relative Value Units (RVUs)
Key Contract Provisions – Salary, Incentive Compensation and Fringe Benefits
Relative Value Units (RVUs)
RVUs are nonmonetary, relative units of measure that indicate the value of health care services and relative difference in resources consumed when providing different procedures and services. RVUs assign relative values or weights to medical procedures primarily for the purpose of the reimbursement of services performed. They are used as a standardized method of analyzing resources involved in the provision of services or procedures.

8. Key Contract Provisions – Salary, Incentive Compensation and Fringe Benefits
Medical Group Management Association (MGMA) publishes a manual, Physician Compensation and Production Survey, which identifies from physician surveys comparative salary information for physicians, including RVUs based on percentiles of compensation.

9. Differentiate between profit and nonprofit sector
Key Contract Provisions – Salary, Incentive Compensation and Fringe Benefits
Differentiate between profit and nonprofit sector
Difference in retirement plan options available in private and non-profit organizations.
Cap on compensation in nonprofit corporations.

10. Key Contract Provisions – Restrictive Covenant
Termination without cause
Failure to renew
Automatic termination on fixed term
Downsizing of physician network
Equities
Do radius calculation to identify what actual restrictive covenant means in reference to application of restrictive covenant.

11. Key Contract Provisions – Office Location and Call Coverage
In large systems – can physician be moved to other locations without consent?
Is restrictive covenant based on office locations?
Is call equitable and consistent with expectations?

12. Key Contract Provisions – Equity Opportunities
Does the employment contract commit to a timeframe for an offer?
What are the voting rights of new owners?
Hard Assets vs. Accounts Receivable
New Employment Agreements
Stock Transfer Restriction Agreements and other Shareholder Agreements
Personal Guarantees for Practice Debt
Buy Out
Is the buy-in methodology fixed in advance?

13. Key Contract Provisions – Professional Liability Insurance
Occurrence vs. claims made
Occurrence coverage covers events during the policy term, regardless of when a lawsuit is filed
Claims made coverage covers lawsuits filed during the policy term, regardless of when the event occurred
“Tail” coverage provides occurrence coverage following a claims made policy
Who bears the burden of coverage post-employment?

14. Key Contract Provisions – Recruitment Agreements
Hospitals and health care systems may offer recruitment agreements directly to new physicians or indirectly to existing physicians
Be realistic in budgeting for new practice expenses
Limit loan amount to assistance needed
Understand payback implications

15. Key Contract Provisions – Sign-On Bonus + Moving Expense
Be mindful of repayment obligations
For moving expenses, pay attention
to Employer rules